WHY DOES COLLEGE COST SO MUCH?

August 29, 2005

In inflation-adjusted terms, college tuition today is roughly triple what it was when parents of today's college students attended school in the 1970s, says Ohio University economics professor Richard Vedder. Tuition charges are rising faster than family incomes. This is an unsustainable trend in the long run, even when scholarships and financial aid are considered.

This fall's probable average 8 percent increase at pubic universities, added onto double-digit hikes in the two previous years, means tuition at a typical state university is up 36 percent over 2002 -- at a time when consumer prices in general rose less than 9 percent.

Vedder explains several factors contributing to the cost explosion:

Since 1994, financial-aid payments (mostly federal loans and grants) have risen by an extraordinary 11 percent per year; when someone else pays the bills, we become less sensitive to price.

Most universities are nonprofit so administrators and faculty are not rewarded for increasing profits by reducing costs or improving product quality; yet the salaries of full professors at research universities are up well over 50 percent in real terms since 1980.

Only about 21 cents of each new inflation-adjusted dollar per student since 1976 actually went for "instruction;" government subsidies and private gifts given to support affordable undergraduate instruction are often spent elsewhere, for research, administration and athletics.

There are now six non-teaching professionals for every 100 students, up from three a generation ago; unless teaching and research have soared in quantity and quality, which seems unlikely, productivity has fallen.

As a consequence of rising costs, college enrollments are no longer increasing as much as before. Price-sensitive groups like low-income students and minorities are missing out, and Vedder says the United States is beginning to fall below some other industrial nations in population-adjusted college attendance.